The Berlin Presentation: Capitalist Restructuring in the Czech Republic since 1989

This is a text of a presentation we have very recently had in Berlin, while at the same time being a development of a talk we gave at the SIC Meeting 2012. It includes also an introductory part on the nature and reasons of bankruptcy of “real existing socialism” (not only) in Czechoslovakia, which was left out in Berlin for a lack of time. The presentation is just the first modest and no doubt imperfect attempt at an overview of capitalist restructuring that has been going on in the Czech Republic since 1989. We try to elaborate its periodisation and to grasp a dialectical unity between changes in the structure of the capitalist class relation and development of a new pattern of struggles that arises in this cycle of accumulation. We believe that only in this way we can get closer to a sound interpretation of developments in the class struggle and its historically specific revolutionary overcoming, i.e. communisation. However, we are still at the beginning of this theoretical work, which remains unfinished and open to critical contributions.

1. Why the Velvet Revolution of 1989?

It would be hardly meaningful to speak about post-1989 restructuring in the Czech Republic without at least mentioning why the 1989 Velvet Revolution came and what was exactly restructured. Briefly, November movement resulted from an impossibility of further reproduction of a particular form of capitalist accumulation that had been structuring “real existing socialism”. Indeed, we believe it is plausible to grasp the previous system as driven by the imperative of value valorising itself, albeit in restricted and distorted forms (in comparison to classical capitalism). Therefore, we see accumulation of capital as a keystone in the historical arch spanning roughly from the pre-“socialist” period up to these days.

“Real existing socialism” or state capitalism was a special model of extensive accumulation adopted in 1948, after the Czechoslovakian Communist Party, with a considerable popular support, seized the state power. This model was designed for rapid completion of late Eastern-European industrialisation and it was widely believed it would overcome all the shortcomings of free-market capitalism such as crises, poverty, unemployment, wars. Its principal characteristics were nationalisation of an absolute majority of means of production, suppression of competitive market exchange and replacing its regulatory function with central planning. Last but not least it was defined by production of a surplus and thus by extraction of surplus labour. The social surplus product was immediately reintroduced into the reproduction circuit of productive capital. Necessary labour epitomised in the wage (including social wage) was a fundamental element of the same circuit and as such it was central to this mode of accumulation.

During the 1950s the wage demand or defence became an underlying terrain of heated struggles across all the “socialist” countries in Central and Eastern Europe. Starting with Czechoslovakia already in the middle of the decade, the bureaucratic capitalist class gradually abandoned a repressive approach towards the working class and was seeking a kind of „class compromise“, which meant basically wage concessions, partial re-direction of the productive forces towards consumption industry and silent recognition of workers power over their labour processes. However, already in the 1960s the local industrialising mission of the CP was largely accomplished and the applied model of accumulation was losing its principal reason, thus forcing the capitalist class to focus more on foreign markets. Moreover, effects of the stalemate in the class struggle also began to slow down the accumulation, which provided a social background for „the liberalisation process“ that was at the end crushed by the Warsaw Pact invasion in August 1968. Shortly after, the economic paralysis produced by the early post-Stalinist class compromise was aggravated by the world crisis in the 1970s. Ensuing capitalist restructuring in the West was even further depriving Czechoslovakian industry of its „Third-World“ markets and together with the rest of the Eastern Bloc it was gradually sinking into a chronic stagnation.

The ruling party, embodying the “class compromise”, was increasingly seen as a repressive political obstacle to social and economical progress. In the same way, workers power and workers identity, that used to be predicated on the importance of labour to the model of accumulation, which became bankrupt, was more and more perceived as a constraint imposed by the Marxist-Leninist ideology, professed by the one-party state. Why? Because both the „compromise“ and workers power lost their substantiation in everyday reality; they ceased to be something organically stemming from social matter, they ceased to be expressions and self-recognition of class belonging.

Thus, the upheaval of 1989 saw itself as “political emancipation” of citizens, while containing and ushering the process of political and economical liberalisation, which immediately ensued. However decisive was the involvement of the working class and the general strike, its political autonomy was nowhere to be seen – times of workers‘ power had passed. When the liberal dissidents from the leadership of the Civil Forums movement happily embraced liberal economists from the Prognostic Institute, it was no anathema to the general direction of the movement: “Go West”. The CP nomenclature succumbed without significant resistance, mostly being aware of the fact that this development was unavoidable and eager to transform themselves into private capitalists.

Post-1989 restructuring has been a continuous process that can be nonetheless divided into several stages, delimited by crises and booms, while their forms indicate different levels of integration into the globalised accumulation process of capital.

The very first stage is usually described as „building capitalism Czech way“. Under a situation of technological obsolescence of the production process and a serious lack of domestic capital, structures and relations of the planned economy were dismantled and enterprises left on their own; severly restricted labour, commodity and capital markets were released from fetters of the Plan; property relations transformed; and the previously closed economy integrated into the world market. Thus the first stage necessarily opened up with the „transition crisis“ of 1991-1993. There was a 30% cut in wages and a sharp contraction in industrial employment, which was immediately offset by a dynamic development of a new service sector, paying low wages. Thus, unemployment oscillated just around 4%. 3/4 of enterprises were in a state of insolvency and there was a 13.2% cumulative loss in the Czech GDP and 22.1% in the Slovakian one. This difference contributed to the partition of the Czechoslovakian federation in January 1993.

Against the backdrop of this crisis, the privatisation process took place. The new private owners were mostly domestic ones, as foreign capital just picked some cherries, like Škoda Auto. The rest did not have enough capital to successfully modernize their factories and make them competitive – sometimes not even to run them as they were – and so their mere survival depended on domestic credit provided by major state-controlled banks. Therefore, a transitional system, nicknamed as „banking socialism“, emerged from crisis years. It represented a standstill in the process of restructuring, preventing more widespread devalorisation and despite of many hardships (10-14% of people living in poverty and about a half of households unable to make savings) maintaining social peace.

The old production sector did not emerge from its “death valley” even during the boom years 1994-1996, when the Czech Republic played a role of the „Central-European tiger“. A strong inflow of foreign capital that increased the money supply in the economy and made it grow, mostly avoided the diseased businesses. Valorisation of the Czech currency on foreign markets hampered their competitiveness even further. In 1994 and 1995 there were first cases of re-nationalisation. Moreover, during the boom an average real wage rose much faster than productivity of labour, but it was quite unequally distributed, as 60% of employees were receiving less than the average real wage and living standards of 2/3 of the population were still by 1/5 lower than before the transition.

In 1996, the internal contradictions of “banking socialism” started to appear, as several small banks collapsed. The whole situation was aggravated by economical slow down in Western Europe, which led to a decline in foreign capital influx. A combined result was the 8.6% deficit on the balance of payments as a ratio of the GDP. All these problems prompted speculative attacks on the Czech currency in May 1997. They led to a monetary „mini-crisis“ that just announced a new recession that lasted roughly for two years: from 1997 till 1998.

Not only in that recession, but already during the boom, we could see the beginnings of a new cycle of struggles. They reflected ongoing transformations in the model of capital accumulation:

labour was being removed from its central position in the capital relation and the wage began to be viewed as a mere cost – the problematic coupling of proletarian and capital reproduction circuits was abolished;

in accordance with this development the social wage which used to be very important came under a permanent attack;

New struggles were not very frequent and appeared in public services plus in huge state-controlled companies that were to be either subjected to wage cuts or downsized and/or privatised. Thus, we had union strikes and protests in health-care and education, as well as on the national railway or in a coal-mining company. Irrespectively of their duration or resoluteness, they were all fragmentary, isolated and directly unsuccessful or they resulted in a “victory” that turned up to be a creeping defeat. With “austerity packages” of 1997 more general protests appeared, like a 100.000 strong union demonstration against wage cuts in the public sector, slashing of social allowances and further deregulation of prices or a much smaller pensioners‘ demonstration against price hikes. They were powerless as well.

At the end of 1998, the first social democratic government came to power, determined to revive restructuring of the old production sector, while dismantling “banking socialism”. They proclaimed 1999 to be “the year, when capitalism in Czechia really began”, as old factories started to default on their loans, lay-off workers and many times even stopped paying wages. During the year, the number of those working without being paid – completely or partially – increased from 30.000 to 100.000. Unemployment reached 9%. This provoked a wave of desperate struggles in that sector that culminated during the „Hot Winter“ of 1999 and „Hot Spring“ of 2000. Their highest points were spontaneous “hunger demos” of workers from a Prague machining factory and occupation strikes in a North-Bohemian coal-mine and in a South-Moravian tractor factory.

In those struggles workers identity was definitively buried. From the hindsight it is quite clear that there was no project of working class autonomy stemming from those struggles. They were exclusively about desperation and powerlessness – about a latent awareness of the fact that „without capital, we are nothing“. Even in those instances, when workers criticised their unions and acted outside of their framework, and such cases were just few, the short-lived moments of self-organisation were as powerless as anything else and only substituting unions, where they were failing, and always readily coming back under their umbrella. Almost all those struggles ended with total failure. Workers accepted complete closures and/or massive lay-offs, redundancy payments and/or part or the whole of their wages being repaid. Workers identity left us for good.

3. The second stage of restructuring: the boom period of 2000-2008

With a clear return of boom years since 2000, the character of a further development of the Czech economy was definitively decided. Under the auspices of the social democratic government and its policy of providing incentives for direct foreign investments a model settled down that is described as „dependent industrialisation“, though „re-industrialisation“ would be a more proper term.

The real influx of foreign investments started in 2005 (+ 6-7% of GDP) and lasted till 2008. In that period the Czech Republic became a kind of “workshop” and warehouse, which was offering a relatively skilled labor force that was at the same time not expensive. Czech companies included themselves as subcontractors in the chains of multinational corporations. The economy as a whole became export-oriented, especially to EU countries – these activities represent more than 80% of the Czech GDP. Of this number, the share of Germany has been about one third. Export has been driven by several big companies: the involvement of small and medium size enterprises in the export has remained weak. The economy concentrates on export of road vehicles and other car industry components.

Moderate workers struggles during the second stage of restructuring appeared in this key sector as well. The most important car manufacturer is Škoda Auto, which is a part of Volkswagen. At that time it employed 26.000 workers and paid some of the highest wages (around 1.200 euros). In spring 2005, to support its position in collective bargaining the trade union organisation called quite a symbolic three-hour strike (each shift stroke for 1 hour), which demanded a 10% wage-rise and obtained a 7% one. Two years later, , after the company had reached record-breaking profits, there was another even more harmless union strike, with a smaller workers participation that achieved only a little more than was the original management´s offer. Though, a dispersed minority of Škoda workers was critical of their union´s conduct, in no way they attempted to come together and challenge the union. For them the situation of sky-rocketing profits and meagre wage-rises was a fatum. Perhaps, an unpleasant one, but definitely inevitable.

Now, it is perhaps necessary to mention a wildcat strike that happened in a Hyundai factory in December 2009. Though chronologically it belongs to the beginning of the next stage of restructuring, it represents a continuity of the working class struggle characteristics I am talking about.

The factory has been producing cars since 2008. It was intentionally built in the Moravian-Silesian Region, where there has always been one of the highest rates of unemployment. Correspondingly, also wages paid by Hyundai are quite low for the Czech car industry (well under 800 euros). However, it was primarily an unbearable amount of obligatory overtime hours and strongly punitive enforcement of work discipline what ignited a small group of workers on a morning shift to launch a wildcat strike there. This had a domino effect because all the parts of the factory are mutually interconnected. Nevertheless, after one hour work was resumed. Two days later there is a meeting of trade unions (that were founded only six months earlier) and management that finally results in an agreement that accepts to limit overtimes, improvement of communication between unions and management and impunity for strike initiators (who are, by the way, also trade unionists). Around the same time, short wildcat strikes of similar nature took place in a couple of supply companies, but without even such an outcome as in Hyundai. They were quickly repressed without any serious opposition, the troublemakers were fired.

So we can see that workplace struggles did not include any stabilisation of self-organised anti-unionist minorities. Conflicts were either completely in the hands of trade unions, or they substituted for trade unions where they were, in the opinion of workers, failing. The core of the conflict lied in the wage, but definitely not as a kind of a vision of systematic empowerment of working class within the capitalist mode of production. What we can see has been a very moderate conflict over the means of individual subsistence (on the workers‘ side) and items on the cost side (from the point of view of capital). Once again, it seems we can say that reproduction circuits of labor and capital have been disintegrated. With the advent of crisis nothing indicates a recovery or establishment of a new reciprocal relation between them.

To conclude this section, I should say that in 2008 a new right-wing government revived the attack on the social wage (further slashing social allowances, dole payments, decreasing taxation of the rich people, while increasing taxes for proletarians, pushing the pension age up, further liberalising rents and not really successfully making some legal arrangements for gradual privatisation of the public pension insurance system and health-care system). In June of the same year, this led the union confederations to organise a common „one-hour general warning strike“ which turned out to be a complete failure. Out of 1.275.000 unionised workers 985.000 took part, but only 306.000 of them really stroke, the rest „supported the strike while working“.

4. Beginnings of the third stage of restructuring as a response to the global crisis

Between 2007 and 2008 public finance deficits were in Czechia lower than was the EU average. Nevertheless, a contagion of the latest crisis came to the Czech Republic in late 2008 and became fully felt in 2009 (- 4.2% GDP), the unemployment rose from 5.5% in 2007 up to 9.5% in 2009. The most affected sectors of economy were manufacturing and construction industries. Year 2010 brought a slight improvement, especially thanks to a fast growth of both export and import and the service sector. However, the last quarter of 2010 was weak and foreshadowed a slump that came in 2011 and has continued until today (- 1.3% last available data for 2012).

In the first year of the crisis, small and short-lived struggles in private companies multiplied a bit, but only in comparison with preceding boom years, because generally there were only few of them. Therefore, there was almost no resistance to downsizing and decreasing or stagnating wages.

In 2010 a new right-wing government came into office, while pledging to implement a policy of fiscal responsibility in order to secure an access to international credit with reasonable interest rates. Principally, it set out to continue in restructuring through further dismantling of social wage. Immediate targets of its reforms have not been only wages in the public sector, pensions, social allowances, dole and introduction of workfare programmes as usual, but piloting attempts at privatisation of social security, opening new possible sources of profit. The public pension insurance system is to be weakened in favour of private pension funds. A mostly postponed reform of university education supposed an introduction of tuition fees and bank loans for students to pay those fees. Even financing and administration of universities should have been opened to capital representatives. A two-tyre treatment was introduced into the public health care system: one cheaper paid for by health insurance and the other more expensive, paid directly by patients. The network of public health care facilities has been continually reduced and opened to privatisation. The unemployed are not to be managed exclusively by state unemployment offices, whose size and number have been reduced, but also by private work agencies. There has been also a not completely successful attempt to oblige all those who receive social allowances to become customers of one private bank that will give them so called Social Card with which they could obtain their allowances from cash dispensers of that bank.

As for public sector employees, the strongest response was produced by an attack on their wages. The government then intended to decrease an overall amount of money paid for wages in the public sector by 10% – either by reducing salaries or by layoffs. Another target of the attack was a system of fixed wage rates, which guarantees to the employees a certain career security. The old system should have been replaced with a more loosen one – to make the remuneration of the workforce more flexible. This intention, however, aroused considerable opposition.

In September 2010, 40.000 people protested against the reform in Prague. The demo was initiated by the Independent Police Union; however it was joined by all other public sector unions. There were policemen, firemen, civil servants, health-care workers, wardens, and workers in education, actors and musicians, even soldiers and many others. There was present also a lot of civic initiatives. Unions called for more socially considerate reforms, arguing for progressive taxation and not loading “too much burden” on ordinary employees and citizens. They (of course) criticized corruption in government contracts. The atmosphere was much more excited than usually. Unprecedentedly (for the Czech conditions), some annoyed policemen-demonstrators even attacked the Ministry of Interior and vandalised its lobby. But neither this event gave sweet fruit. Very soon, the trade unions accepted wage cuts of 10 %; change in the wage system was largely scraped. During December 2010 several local union demos took place, but their strength was far beyond the success of the September demonstration.

However, it reinforced determination of public health-care doctors to go on with their own long-lasting wage dispute. Since they formed their independent Doctors Union Club (LOK) in the 1990s, they have always been criticising the fact that the Czech public health-care system has been running well only thanks to an unprecedented amount of overtime work they are obliged to serve (many times working nearly 100 additional working hours per month). It is true. If they describe themselves as „proletarians of the health-care“ it is in order to complain that highly educated employees, who consider themselves as a middle class have to work long hours in an insane pace to achieve living standards they consider as a norm of their social reproduction. This wage question has been most acute for younger doctors, whose working conditions are worst and incomes lowest. In 2010, a gross wage of a just graduated doctor was 4 € per hour and of a doctor before retirement 8 € per hour.

In May 2010, their union announced a protest action called „Thank You, We Are Leaving.“ Because health care workers have to provide acute care while striking, which significantly reduces effects of such a strike, doctors chose another way of struggle: in the fall 2010 they collectively resigned on their contracts. They declared that they are so underpaid in the Czech Republic that the only solution they have is to leave the country and go west (especially to Germany). Initially, when the movement existed on a declaratory level, 7.000 doctors signed an appeal to the Ministry of Health Care. But from the total number of approximately 16.000 doctors, only a fourth – so nearly 4.000 – finally took an active part in the event. All their contracts were to expire on the 1st of March 2011.

There were some negotiations, but an agreement was not reached. The situation has sharpened. Even a state of emergency and a laughable idea of deploying field hospitals of the army got into the game. The pressure of the state and media put on struggling doctors was enormous and so in the middle of February the agreement was finally reached. It represented quite a Pyrrhic victory. Unconditionally they received a wage-rise from 200 to 320 € per month for the year 2011. For 2012 they were promised a wage-rise by 10% for all health-care workers and in 2013 an average doctor’s wage was promised to be by 50% higher than the average national wage = something around 1.437 €. But all promises were conditioned on saving money through restructuring of the public health care and abolition of fixed wage rates for doctors since the 1st of January 2013.

Nevertheless, this agreement was good enough for the union to escape from a reached impasse. First, the struggling doctors were alone from the very beginning, but as the time went on they were getting more and more isolated, because of material fragmentation of labour power and its working conditions. Middle aged and old doctors, who are best paid, remained passive or openly hostile towards the struggle. Nurses and other health-care workers were mostly against the struggle as they were afraid that a possible doctors’ victory would eventually mean less money for themselves.

Second, in the course of the struggle it was more and more evident that even if they were able to bring the public health care system on the verge of collapse and put an unprecedentedly strong pressure on the government and had a good chance of winning a substantial (in Czech conditions) wage rise, the more complete their victory would be, the sooner it would turn against them, as they would still remain just well-paid employees who need to be needed by capital. The dream of “going West” was evaporating (only 5% of them, about 200 doctors, really found jobs abroad) and the inevitability of restructuring the public health care system was not only understood by all of them, but to a certain extent also espoused by the union leaders. And the government openly threatened that if the movement would push too far (in the sense of no compromise), it would simply let them leave their jobs since the beginning of March 2011, let the health care system plunge into deep troubles and transform this situation into a “spontaneous” and dramatic shock-wave restructuring, opening gates widely to privatisation, hospital closures, mass redundancies and attack on wages. To go on struggling as proletarians would eventually hamper their reproduction as workers.

Following the ratification, the movement collapsed into an unorganised retreat: once more, everybody was individually asking the employers to cancel their notices and when they refused, keeping true to the previously proclaimed solidarity was out of question. Already a year after, the government refused to fulfil its commitments and pushed for re-negotiations at the level of individual hospitals. However, this time any further doctors’ mobilisation was out of question. The previously dynamic union was significantly weakened by its own victory.

5. “Civil society revival” and radical democratism

Besides the above discussed struggles, the current crisis, austerity measures and plans for restructuring of the public sector have produced a multi-faceted movement, containing a revival of radical democratic tendencies, which following the peak of the anti-globalisation movement in 2000, retreated into NGOs and academia. This movement understands itself as „civil society revival“. Its important source is an omnipresent „democratic deficit“ which is an integral part of the latest capitalist restructuring. This deficit, accompanied by impoverishment of low and middle income strata and a never-ending series of corruption scandals, has produced a certain level of representative democracy de-legitimisation.

What is emblematic for the current situation is a rocket-like rise of the Pro-Alt association. Its practical existence is about connecting formerly ghettoised radical democratic alternatives with unions and citizen initiatives like students, disabled people, patients or pensioners associations on a basis of a vague post-Keynesian vision. Nevertheless, by itself radical democratism is even now able to bring to the streets only hundreds of people. It is more like a soul animating trade-union and other muscles of the “civil society revival” movement, which still recognises the state and puts forward demands.

One of its expressions at the beginning of 2012 was a student movement against decreasing public funding of universities, introduction of tuition fees and restricting academic liberties. Though it was able to mobilise some 20.000 students and teachers, it was quite minoritarian, as most students can still believe that their future is quite bright. After a pre-arranged week of actions, the movement just collapsed without achieving anything, except of a change of the minister and a slow-down in the process of reforms.

What has represented the peak of the „civil society revival“ so far, was the alliance „Stop the Government“, including union confederations, Pro-Alt, student activists and other citizen associations. In May, it was able to bring 120.000 people to Prague in order to protest against the new stage of restructuring. They were also organising other minor demonstrations and symbolic blockades of ministries, but all in vain – the government has not withdrawn even a smallest part of its reforms.

Another expression of the same trend was much more populist and patriotic, but at the same time a grassroots citizen movement, called the Holeshov Call, which unlike the others did not ask anything from the state. It was able to mobilise perhaps 20 thousands of people for several weeks in many cities and towns, while mediating the current class conflict through a refusal of the government and representative democracy and calling for an immediate introduction of a form of direct democracy and also practicing it during its gatherings on squares. Thus it might be considered as a particular and spontaneous Czech reflection of the „indignados“ phenomenon.

One more thing that must be mentioned was the phenomenon of „anti-Gypsy protests“ in autumn 2011. In fact, they were about the issue of a slowly growing surplus population in Czechia. Since the beginning of transition its main component was a big part of the Gypsy minority. This reality is the main source of widespread anti-Gypsy racism. With new austerity measures, a smaller part of the “white” majority has been falling into the surplus population, especially in localities with high rates of structural unemployment. These towns became sites of local “whites” demos against Gypsies which lasted for a couple of months. There was a conflictual intermingling with far-right activists, who tried to exploit the situation, which led to a few attempts at pogroms and a clash with riot cops. At the end of this movement, it became clearer that what was at stake was their own social degradation and increasing competition for social benefits among the useless ones.

To sum it up, the fact is that all this „civil society revival“ bumps at the reality of crisis and impossibility of demands being met. This could break current limits of the class struggle, but it remains to be seen, how this will happen.